CDI Outfits Barred from Calif. Signals

A dispute over hub-fee agreements has left some Churchill Downs Inc.-owned tracks and related off-track betting facilities without racing signals from California.

The Thoroughbred Owners of California has withheld the right for signals from Golden Gate Fields and Santa Anita Park to go to CDI-owned Arlington Park, Churchill Downs, and Fair Grounds Racing and Slots, as well as the tracks’ affiliated OTB sites.

At the center of the dispute are agreements made between TrackNet Media Group – which is a joint content venture for CDI and Magna Entertainment Corp. – and tracks over hub fees paid by advance deposit wagering (ADW) entities on bets made by California residents. Hub fees in California are the percentage of a wager retained by an ADW, with remaining takeout split between the host track and horsemen.

Scott Daruty, TrackNet president and chief executive officer, said his company was informed Jan. 15 of the pending signal shut-off, just hours after informing the TOC the state-mandated agreements for 2009 had been reached for California. He claims the TOC, which was not part of the negotiating process, took umbrage with the terms without examining the agreements, and at first also included MEC tracks in the ban.

“But on Friday or over the weekend, the TOC basically allowed the signals to go to the Magna tracks and OTBs,” he said of MEC, which owns Golden Gate and Santa Anita. “The reason the TOC is treating Magna and Churchill tracks differently is that there is a small difference in how the agreements are worded. But substantively and economically, they are identical.”

Drew Couto, president of the TOC, disagreed that the agreements are similar, and claimed TrackNet indicated it would allow the horsemen’s group to sign off on the deal, a courtesy he said had been extended in years past.

He further claimed it’s not a good business arrangement when “an ADW negotiates rates with itself,” noting that Twinspires.com and XpressBet.com are licensed California ADWs respectively owned by CDI and MEC.

“MEC understood the impropriety and went back to the rates of last year,” he said. “Churchill sees it differently. What we have right now is a technical problem, and we are going to try and get it resolved.”

Unlike other disputes over ADW revenue-sharing that handcuffed racing signals in 2008, California law allows tracks and ADWs to work out hub-fee agreements covering less than two years without a sign-off from a horsemen’s group such as the TOC. The TOC has a right to ask for arbitration if it disputes the terms.

“I wish the TOC had not cut off the signals,” Daruty said. “I thought their reaction was out of proportion to the disagreement over the language. And I think there is no relationship between their disagreement with hub agreements and the simulcasting of signals to Churchill tracks and OTBs. It seems to be retaliatory.”

Couto said TrackNet at the end became “flippant” about the negotiations. “It seemed they weren’t doing what was right for California racing, but only what was right for TrackNet,” he said.

The ban does not include signals sent to Calder Race Course, which is also owned by CDI, because Gulfstream Park, which is owned by MEC, by Florida state law would have also had to have been barred.